Even more farmers will be affected by the Government’s changes to inheritance tax than expected, according to further analysis by the Central Association of Agricultural Valuers (CAAV).

It recently produced a report showing that the Government had under-estimated the number of farmers affected by a factor of at least five – so 75,000 producers over a generation, not 500 in 2026/27. And now deeper analysis has unveiled another swath of farmers who had previously been excluded from the figures.

“Looking at HMRC’s express advice on tax returns, it states that where full business property relief (BPR) applies (as in most farming cases), the values given in tax accounts should be used, not the open market value,” says Jeremy Moody, secretary and adviser to the CAAV. “Farmers’ accounts for assets that qualify for BPR – like machinery and livestock – are based on historic cost. This means they will be valued at significantly less than open market value.”

However, the new rules will mean that all assets will need to be accounted for at current market value, bringing significantly more people into paying inheritance tax and adding more cost to those already affected.

The CAAV’s latest research shows that this change will have a particular effect on many livestock farms. “Not only does HMRC allow that the ‘deemed cost’ for cattle in accounts is 60% of market value, but the statutory ‘herd basis’ option for accounting for tax on breeding and production animals is based on the original cost of a herd or flock,” explains Mr Moody. “Market value would mean a potentially massive uplift over the accounting value for a long-standing dairy herd, for example.”

When BPR was offered at 100% on these assets, it was pragmatic of HMRC not to require them to be independently valued, so saving all parties time, effort and cost. But now livestock, machinery, silage and other operational farming assets will have to be valued upon death, and tax paid on anything worth over £1m.

“All of this means that yet more money will have to be found to pay the tax, whether by selling more land, more operational business assets, or foregoing more income and investment,” Mr Moody adds.

“It was clear from the outset that the Government had not appreciated the potentially devastating implications of this new farm tax. Not only did our original research show it had underestimated its impact five-fold, by omitting large numbers of farmers from its figures, it’s now clear that even more people will be affected.  This hurts the people it claims to protect and protects those it claims to hurt. It is time to drop this tax.”

• For more information visit www.caav.org.uk.

 About the CAAV

 The Central Association of Agricultural Valuers (CAAV) is the specialist professional body representing, qualifying and briefing over 3,000 members practising in a diverse range of agricultural and rural work throughout England, Wales, Scotland and Northern Ireland.

CAAV members are agricultural and rural valuers who provide professional advice and valuation expertise on issues affecting the countryside from tenancy matters to sales and purchase of farms and land, from taxation and compulsory purchase to auctioneering, and from conservation issues to farming structures.

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